Electrification is key to achieving clean energy, and the Inflation Reduction Act helps homeowners and renters make the transition.
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Electrification amped up

Understanding The Inflation Reduction Act for California

Kimberly Hutchings
July 26, 2023

The Inflation Reduction Act and Other Electrification Incentives for California

August 16, 2022, marked a significant date in the fight against climate change as President Biden signed into law the Inflation Reduction Act.

Building on the administration's Bipartisan Infrastructure Law (otherwise known as the Infrastructure Investment and Jobs Act of 2021), the Inflation Reduction Act signifies the most notable piece of action ever taken by Congress in combating today’s climate crisis.

The new legislation, which works to develop and support a national clean energy economy, offers financial incentives in the form of grants, credits, rebates, and other opportunities that make investing in an efficient future more accessible and affordable for all.

The program was drafted at a federal level, offering $400 billion in tax provisions, but its implementation will be state-specific, with many states offering additional financial incentives to residents.

For instance, in California, homeowners can receive an extra $2,000 back on the purchase of a new heat pump space heating system, upwards of $3,000 back on new heat pump water heaters, home battery storage systems and select home electrification projects, and as much as $9,500 towards the purchase or lease of a qualifying clean vehicle and home charging station — and that’s just the start of it!

As a consumer, it’s a chance to reflect on your current energy habits, consider where you can improve, and take advantage of the financial support available to you in achieving a more energy-friendly lifestyle.

To get started, let’s begin with the basics. The Inflation Reduction Act and most state-specific incentives fall under the umbrella of three types of funding — tax credits, tax rebates and grants. Here’s a quick breakdown of each of them.

Tax Credits

Tax credits present an opportunity to offset your income taxes, reducing your amount owing at the time that taxes are due. Because these credits simply offset the amount you owe, it’s important to remember that they’re only beneficial if you have a bill to pay come tax time — anything left over cannot be claimed as cash back in the form of a refund.

Sounds confusing? We promise it really isn’t! Think of it this way…

If you owe $3,000 in taxes but qualify for a credit of $5,000, the most you will receive back is $3,000 because that’s the amount you owe. The value will be applied directly to your tax bill, and the balance of $2,000 will remain unused.

Under the Inflation Reduction Act, there are three major federal tax credit opportunities worth noting, the Residential Clean Energy Credit, the New and Previously-Owned Clean Vehicle Credit, and the Energy-Efficient Home Improvement Credit.

Tax Rebates

Other notable tax incentives you’ll want to pay attention to fall under the category of tax rebates. Unlike tax credits which, as we’ve just learned, are dependent on how much you owe come tax time, rebates can be cashed in for money back, regardless of your amount owing. Think of them like a partial refund on your clean energy investments!

Consumers should be prepared to pay for their purchases upfront, as rarely are these rebates applied at the time of purchase, but this may change in the coming years.

Under the Inflation Reduction Act, there are two key federally-funded rebate opportunities to remember, the Home Energy Performance-Based, Whole House Rebate Program (HOMES), which supports retrofitting homes with improved HVAC and insulation systems, and the High-Efficiency Electric Home Rebate Act (HEEHRA) which offers funding towards home electrification projects.


The final type of financial incentive you’ll want to familiarize yourself with is a grant. Think of grants like a gift, issued before you make a purchase, *granting* you the ability to make the investment.

A grant is similar to a loan, although it doesn’t need to be paid back — win!

California-Specific Energy Incentives

California’s state-specific energy incentives offer a wide range of options for consumers looking to invest in a clean energy future, with some of the most beneficial investments being those related to solar energy, insulation, HVAC systems and home electrification projects.

Below is an overview of the upgrades you may want to consider making and their associated statewide funding opportunities.

Want to know more about the Inflation Reduction Act at a federal level? Click here!

Get a Better Understanding of Your Energy Habits

The best place to start when it comes to energy improvements is with an understanding of your existing habits. A home energy audit can help you think critically about your current lifestyle and where you may be falling short.

During a home energy audit, a licensed auditor will visit your home to conduct an in-person walk-through, during which they’ll assess each room for energy use, ask questions about your daily habits and offer advice on opportunities to upgrade.

Before your auditor arrives, take some time to reflect on the ways you’re currently using energy in your home. The U.S. Department of Energy recommends asking yourself questions like:

  • How many people are at home during working hours?
  • Is every room used regularly?
  • How many people live in your home?
  • What temperature do you typically set your thermostat at during the warm and cold weather months?

At the end of the audit, you’ll receive a written report with all of the auditor’s recommendations for your property — kind of like an instruction manual for better energy efficiency!

The Energy-Efficiency Home Improvement Credit

The Energy-Efficiency Home Improvement Credit offers existing homeowners and renters the chance to subsidize the cost of a home energy audit. Through this federally-funded credit, consumers can claim 30 percent of the cost of their audit, up to a value of $150, now through December 2032.

Some California residents may also benefit from a free energy audit through their utility provider. Make sure to ask yours what they can do for you!

Upgrade Your Home’s Sealing and Insulation

Poor insulation and leaky doors and windows can be major energy bill contributors, forcing your HVAC system to work overtime as your home leeches hot and cold air.

Weatherization projects aim to mitigate some of these inefficiencies by fixing insulation issues and repairing or replacing doors and windows with more efficient alternatives.

As a California resident, upgrades to your home’s sealing and insulation may benefit from one of the following funding opportunities

Weatherization Assistance Program (WAP)

The Weatherization Assistance Program (WAP) is a federally-funded program offered through the U.S. Department of Energy that helps low-income homeowners and renters reduce their energy usage through a variety of fully-paid-for weatherization and energy-efficient home improvements, including the repair or replacement of windows and doors and the installation of window film, awnings, solar screens, insulation and more.

Qualification for the program depends on your household's average monthly income. You can learn more about the Weatherization Assistance Program (WAP) by clicking here.

California's Energy Savings Assistance Program (ESA)

The Energy Savings Assistance Program (ESA) also provides no-cost weatherization upgrades, like door and building envelope repairs, attic insulation, weatherstripping and caulking, to California residents who meet the California Alternate Rates for Energy (CARE) income limits.

Deed- and non-deed-restricted multifamily buildings can also qualify for the Energy Savings Assistance program, so long as the property owner can verify that at least 65 percent of tenants meet the above income requirements for deed-restricted properties and at least 80 percent in non-deed-restricted properties.

Learn more about California’s Energy Savings Assistance (ESA) program and the Energy Savings Assistance Multifamily Whole Building (ESA MFWB) program by clicking here.

Upgrade Your HVAC System

Updating your heating, ventilation, and air-conditioning (HVAC) system can improve comfort, enhance air quality and upgrade the overall efficiency of your home.

Smart thermostats offer increased control over your home’s temperature day-to-day, and heat pumps are quickly becoming a heating and cooling industry standard, providing a super-efficient, all-in-one solution that can save you a ton of money in the long term. While installing a heat pump system can be pricey, costing anywhere from $2,500-$35,000, a number of state incentives (as well as those offered federally) can make the decision to upgrade more affordable.

Here are the funding opportunities you’ll want to know about.

TECH Clean California

TECH Clean California is a statewide initiative aimed at accelerating the adoption of residential clean energy technology. The program offers single-family homes the opportunity to save up to $1,000 on new heat pump systems, with the choice to install up to two incentivized systems per residence for a total of $2,000 in potential savings. In order to qualify for the incentive, households must meet the criteria outlined in the chart below.

Heat Pump HVAC Systems

  • System must be installed by a TECH-enrolled contractor.
  • The project must be a non-heat pump to heat pump installation.
  • The residence must not be a new construction (retrofits only).
  • Equipment must be an AHRI-matched system.
  • Equipment must meet Title 24 code minimum standards.

Learn more about TECH Clean California incentives by clicking here.

The California Golden State Rebate Program

The California Golden State Rebate Program also offers consumers a rebate of $15 on the purchase of qualifying ENERGY STAR room air conditioners — a complete list of eligible models and where they’re available for purchase can be found here.

Additionally, consumers can receive a $40 rebate on the purchase of an Amazon smart thermostat or a $75 rebate on the purchase of a qualifying ENERGY STAR smart thermostat through the rebate program. You can find a full list of qualifying smart thermostat devices and their purchasing details here.

The California Energy-Smart Homes Program

Homeowners planning to upgrade to an electric heat pump space heating system may also benefit from savings under the California Energy-Smart Home Program, providing they are also making additional home electrification upgrades. Click here for more details on the program’s requirements.

Replace Your Water Heater

Did you know that heating water can account for 14-25 percent of the energy consumed in a home? Yikes! Your hot water heater can be a pretty big energy hog, but investing in a more efficient system can help to minimize its impact. The great news is Californians can upgrade and save through the following rebate opportunities on heat pumps and high-efficiency gas tank water heaters.

TECH Clean California

TECH Clean California provides reimbursement opportunities for homeowners looking to install heat pump water heaters in their homes. The rebate offers savings of $1,000-$3,100 but must be filed directly by a TECH-enrolled contractor in order to qualify. Approved consumers will then receive the rebate as a line item on the final invoice for their project.

In order to receive this rebate opportunity, the installation must meet the criteria outlined below.

Heat Pump Water Heater

  • The consumer must be a customer of Southern California Gas.
  • The system must be NEEA Tier 3 and/or Energy Star certified.
  • The system must be installed by a TECH-enrolled contractor.

Learn more about TECH Clean California rebates by clicking here.

The California Golden State Rebate Program

Additionally, the California Golden State Rebate Program offers incentives for water heaters that meet the following qualifications.


  • Must be 45-55 gallons.
  • The minimum UEF is 3.30.
  • Must be replacing a 40 or 50-gallon electric storage water heater or a 40-gallon gas storage water heater.


  • Energy Star certified.
  • Must be 40 or 50 gallons.
  • The minimum UEF is 0.64
  • Must be replacing a like-size natural gas tank water heater.

Qualifying heat pump water heaters will receive a rebate of $500 while qualifying high-efficiency gas water heaters will receive a rebate of $75. You can find a list of current qualifying models as well as details on where they’re stocked by clicking here.

The California Energy-Smart Homes Program

Homeowners planning to upgrade to an electric heat pump water heater may also benefit from savings under the California Energy-Smart Home Program, providing they are also making additional home electrification upgrades. Click here for more details on the program’s requirements.

Install Energy-Efficient Appliances

Another great way to enhance the energy efficiency of your home is through your appliances, and for that, you’ll want to look for appliances and devices that have the Energy Star certification.

Energy Star-certified products are products that function the same or better than their traditional counterparts but with the added bonus of being more energy-efficient. In order to qualify, they must meet a set of strict criteria set forward by the U.S. Environmental Protection Agency and the U.S. Department of Energy.

For instance, on average, Energy Star light bulbs use ⅔ less energy than traditional incandescent bulbs, Energy Star refrigerators run 15 percent more efficiently than the minimum federal efficiency standard, and Energy Star televisions consume ½ the power of a standard television when switched off and in standby mode.

Convinced it’s time to make the upgrade? Here’s what you need to know.

Energy Star Rebate Finder

Consumers can locate rebate incentives on Energy Star home appliances by using Energy Star’s Rebate Finder.

To find rebates available to you, simply input your zip code into the search bar, and the Rebate Finder tool will provide you with a comprehensive list of rebates and special offers on Energy Star-certified products offered by Energy Star partners near you — easy!

You can access the tool by visiting the Energy Star website here.

Invest in Solar

Did you know that California ranks first in the nation for solar energy? It's true! In fact, as of 2023, there are enough solar panels installed in California to power 11,052,679 homes — and a number of statewide incentives are helping that number to grow!

As a homeowner, consider options like the following.

Solar Energy System Property Tax Exclusion

Installing a residential solar energy system can increase your home’s property value, but with increased property value comes an unfortunate increase in property taxes too. Luckily, there’s a statewide incentive that can help!

Under the California State Board of Equalization, new and existing homes that are outfitted with solar capabilities will be excluded from property tax increases through to the end of 2024 — so if you’re planning to make the upgrade to solar in 2023, you’ll benefit from a full year of savings before the exclusion expires.

Self-Generation Incentive Program (SGIP)

The Self-Generation Incentive Program (SGIP) is a program operated by the California Public Utility Commission (CPUC), providing financial incentives to consumers who install energy storage systems in their homes.

If you have solar panels, battery storage systems are a great way to store excess solar energy that can be used in the event of an outage or if you want to go off-grid during peak times (hello, OhmHours!). In some instances, these storage systems can even allow you to send power back to the grid through a process called net energy metering, earning you a profit on your solar power while helping to reduce grid strain during times of high demand! Even without a home solar system, battery storage can be beneficial in reducing grid reliance, offering a way to store extra power that can be used during blackouts and other emergency situations. Investing isn’t cheap, with some battery systems costing around $15,000, but the Self-Generation Incentive Program can help!

The Self-Generation Incentive Program comes in the form of a one-time rebate, depending on the size of your home’s battery storage system, and its value can vary from community to community based on a number of factors.

The General Market Rebate applies most broadly. Under this rebate, any residential customer of Pacific Gas and Electric Company, Southern California Edison, Southern California Gas Company, and San Diego Gas & Electric will qualify for an approximate rebate of $250/kWh on their battery storage system. This equates to roughly $3,000 back on the purchase of a 12 kWh battery!

Some consumers may also qualify for a more substantial refund under the SGIP’s Equity and Equity Resiliency Rebates, which offer rebate values of $850/kWh and $1,000/kWh, respectively. You can find the eligibility criteria for these rebates in the below.


You must meet one of the following criteria:

  • You live in a single-family home, and your home is subject to resale restrictions.
  • You live in a single-family home and have already participated in or have reserved incentives in the Single-Family Affordable Solar Homes (SASH) or Disadvantaged Communities – Single-Family Solar Homes (DAC-SASH) program.
  • You live in an apartment that is considered low-income housing and includes at least five rental units. You must also be located in a Disadvantaged Community (DAC), or at least 80 percent of the apartment building residents must have incomes at or below 60 percent of the Area Median Income.
  • You live in an apartment, and the property has already participated in the Solar on Multifamily Affordable Housing Program (SOMAH) or the Multifamily Affordable Solar Housing (MASH) program.
  • You live anywhere in California Indian Country.


You have experienced two or more utility Public Safety Power Shut-offs (PSPSs) OR live in a Tier 2 or Tier 3 High Fire Threat District (HFTD). AND you meet one of the following additional criteria:

  • You live in multifamily deed-restricted housing or a single-family home subject to resale restrictions.
  • You are currently enrolled in a utility Medical Baseline Program
  • You have notified your utility of a serious illness and/or life-threatening condition.
  • You have received or reserved other solar-related incentives (including SASH, DAC-SASH, MASH, or SOMAH programs).
  • Your home relies on electric pump wells for water.

Like most other rebates, the Self-Generation Incentive Program is not typically offered as an upfront refund, but this is starting to shift. Some installers are now able to apply the rebate immediately, helping to remove access barriers for households that may not be able to afford the full upgrade costs upfront.

To get started, CPUC recommends contacting your utility provider or a professional installer to walk you through the process. They'll be able to help you determine which rebate you qualify for, what storage solution will be best for your home, and help you complete the final application.

Disadvantaged Communities-Single-Family Solar Homes Program (DAC-SASH)

Modeled after California’s hugely successful Single-Family Affordable Solar Homes Program (SASH), the Disadvantaged Communities - Single-Family Solar Homes Program (DAC-SASH) is designed to help homeowners in disadvantaged communities (DACs) receive rooftop residential solar systems at a reduced cost.

The program, which is slated to operate through 2030, offers a one-time rebate of $3 per watt for the installation of a residential solar energy system. In California, the average solar system costs approximately $3-$5 per watt, so this rebate can cover 75-100 percent of the total project costs for qualifying households!

To receive the rebate, homeowners must reside in the top 25 percent of the most disadvantaged communities statewide, be a customer of Pacific Gas & Electric, Southern California Edison, or San Diego Gas & Electric and meet the income requirements set forth by annual California Alternate Rates for Energy (CARE) and Family Electric Rate Assistance Program (FERA) guidelines.

You can use this map here to find out if you live in a qualifying neighborhood.

Prioritize Clean Energy Sources

If you’re not in a position to invest in a home solar system for your property, don’t fret! In California, there are a few other ways you can prioritize clean energy and save some money in the process! Consider the following opportunities.

The Disadvantaged Communities Green Tariff (DAC-GT) Program

The Disadvantaged Communities Green Tariff (DAC-GT) program aims to improve access to renewable energy sources for low-income consumers by offering utility-scale clean energy access with an incentivizing 20 percent discount on monthly energy bills. This allows participating households to receive 100 percent of their home’s energy from clean, renewable sources, all while saving money on their utility bill in the process!

In order to qualify, consumers must reside within a documented disadvantaged community (DAC) and be a customer of Clean Power Alliance, CleanPowerSF, East Bay Community Energy, Lancaster Choice Energy, Marin Clean Energy, Pacific Gas & Electric, Peninsula Clean Energy, Pico Rivera Innovative Municipal Energy, San Diego Community Power, San Diego Gas & Electric, San Jacinto Power, San Jose Clean Energy or Southern California Edison.

You can find out if you live within a qualifying community by clicking here.

Additionally, residents must meet the income limitations outlined by the annual California Alternate Rates for Energy (CARE) and Family Electric Rate Assistance Program (FERA) guidelines.

The Community Solar Green Tariff (CSGT) Program

Similar to the Disadvantaged Communities Green Tariff (DAC-GT), the Community Solar Green Tariff (CSGT) program offers consumers in disadvantaged communities (DACs) the opportunity to power their homes through 100 percent locally-generated solar power in addition to a 20 percent discount on their monthly energy bill.

Qualifying residents must be a customer of Clean Power Alliance, CleanPowerSF, East Bay Community Energy, Marin Clean Energy, Pacific Gas & Electric, Peninsula Clean Energy, San Diego Community Power, San Diego Gas & Electric or Southern California Edison.

Unlike the Disadvantaged Communities Green Tariff program, this program is only subject to geographic requirements and is not income-specific. Find out if you live within a qualifying neighborhood by clicking here.

Opt for Home Electrification

Residential electrification projects are a major focus of the Inflation Reduction Act, with the High-Efficiency Electric Home Rebate Act (HEEHRA) offering up to $14,000 in funding opportunities for low- and moderate-income households looking to make the switch.

In California, this focus on home electrification has been adopted at a state level too, and residents can take their upgrades even further by accessing a number of additional financial incentives.

The California Energy-Smart Homes Program

The main incentive opportunity you’ll want to make note of is the California Energy-Smart Homes Program which provides incentives to new and existing single-family homes, duplexes, townhomes, multifamily low-rises, alterations and accessory dwelling units (ADUs) looking to transition to all-electric systems.

The program is available to Pacific Gas & Electric, San Diego Gas & Electric, and Southern California Edison customers.

For new construction projects, dwellings must meet the following installation requirements in order to qualify for the program’s rebate opportunity.


  • Communicating thermostats*
  • Induction cooking
  • Heat pump water heating
  • Heat pump space heating
  • Segregated circuits
  • A 240-volt plug for electric vehicle charging infrastructure**
  • Battery storage readiness**
  • Thermostatic mixing valves**


  • Communicating thermostats*
  • Induction cooking
  • Heat pump water heating
  • Heat pump space heating
  • Segregated circuits
  • 240-volt plugs for electric vehicle charging infrastructure  
  • Thermostatic mixing valves

*Not required for properties installing variable-capacity heat pumps (VCHP.

**Not required for ADUs.

Funds are available for new construction dwellings on a first come, first served basis with the offer expiring when funds are exhausted. Available funding will also reduce over time at the these values available between now and 2026. You can learn more about the opportunities available for new construction homes by clicking here.

The California Energy-Smart Homes Program also applies to existing single-family homes and multifamily low-rise residences, covering retrofitting costs associated with home electrification projects. In order to qualify, existing homeowners must have the work completed by a licensed contractor and provide before and after photos of each appliance being replaced.

Similar to new construction homes, funds are available on a first-come, first-served basis, with incentives reducing in value over time. Once exhausted, funds will no longer be available. Existing single-family dwellings can take advantage of significant rebate opportunities.

Next Steps

Now that you have a better idea of California’s statewide energy incentives, it's time to take action! 

Consider which investments will benefit you and your family the most, find a licensed contractor to help you get the job done, and explore any additional incentives that may be available to you at a municipal or private level through your utility provider — you’d be amazed at how much is out there!

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